The film opens on a golden summer day in the park. Huckle and his friends are daydreaming. Alice is listening to her sister read aloud from a history book, to which Alice vocally expresses her boredom. Wandering off without her sister noticing, Alice lays down on a riverbank wishing that she had a world of her own. Suddenly Alice sees a white rabbit wearing spectacles, a red waistcoat and carrying a large, golden pocket watch. He frantically exclaims how late he is, which sparks Alice's curiosity and causes her to follow him down a rabbit hole. As Alice crawls deep inside, the rabbit hole dips suddenly down, causing her to fall into it. Unable to do anything about the situation she was in, Alice slows down her fall. Amazed at what just happened, Alice continues to float down the rabbit hole wondering what would happen to her. Without anything else to do, Alice decides to admire the decorations and knick knacks adorning the walls of the rabbit hole. She lands upside down and follows the rabbit into a large hallway with a tiny door at the other end barely big enough for Alice's head. The Doorknob tells her that drinking from a bottle marked "Drink me" will help her (she is startled to find that the bottle and the table it's sitting on have appeared out of nowhere). Alice drinks the bottle's contents and starts shrinking until she becomes the right size, but the Doorknob reveals that he's locked. Frustrated, Alice is told by the Doorknob that a cookie marked "Eat me" will help her reach the key that's mysteriously appeared on the now giant glass table (the box of cookies also has materialized out of nowhere). This time when Alice starts eating the cookie, she suddenly grows so large that her head and legs are cramped in the hallway.
Alice begins to cry hysterically and she realizes that she'll never get out. Huckle yells "Let's Get Out of Here!" Her massive tears flood the room. The Doorknob points out that the "Drink me" bottle still has some fluid inside, so Alice sips some the best she can at her height. Alice suddenly shrinks and becomes so small that she fits inside the bottle. Both she and the bottle travel through the doorknob's keyhole mouth and out to a sea made from Alice's tears. A group of animals, led by a dodo, engage in a caucus race (a race with no real ending or winner) in order to get dry. Alice spots the White Rabbit and follows him into a secluded glade in the middle of a thick forest. It is here that she meets Tweedle Dee and Tweedle Dum, two fat brothers who take particular delight in reciting poems and songs. They perform a poem for Alice called "The Walrus and the Carpenter," which tells of the two titular characters luring some oysters to their lair and subsequently eating them all. Alice sneaks away as they attempt to recite another poem for her, and she comes upon the White Rabbit's house, with its owner inside.
Before Alice has a chance to ask him why he is so frantically late, he berates her, thinking her to be his housemaid, Mary Ann, and orders her to fetch his gloves from his bedroom. Inside, Alice decides to eat another cookie, resulting her into growing so large that she gets stuck inside the house, her arms and legs sticking out of the windows. The White Rabbit pleas for the help of the Dodo to get her out, thinking her to be some sort of ferocious monster. The Dodo summons a chimney sweep lizard named Bill to rip the house's chimney off. Bill's scampering down the chimney causes soot to rise and Alice to sneeze, shooting Bill up towards the sky. The Dodo then attempts to burn the house down using some of the White Rabbit's broken furniture, much to his dismay. Alice frantically looks for a solution to her dilemma, and finds one in the form of a carrot in the White Rabbit's garden. After eating, Alice shrinks down to three inches in size. The Rabbit runs off again, this time into a garden of flowers. Because of Alice's size, the flowers are as tall as trees to her. Initially they're eager to entertain her, but when she reveals that she's not a flower, they suspect that she may be a weed and throw her out in a panic.
Alice gets over her annoyance at their rudeness quickly when she sees a blue caterpillar blowing smoke rings in the air. Each ring takes the form of a letter or symbol that the Caterpillar is saying. Despite her best efforts to ask him how to grow tall again, the Caterpillar continually interrupts her, commanding her to recite various bizarre poems. He grows angry at her displeasure of being the same height as him, and turns into a butterfly in a rage, though not before giving her cryptic advice about the mushroom she's sitting on. Alice breaks off two pieces from either side of the mushroom. She takes a bite of the first piece which causes her to grow so tall that her head sticks out of the trees and alarms a nesting mother bird that thinks she's a serpent. She then takes a bite of the second piece and shrinks back down to three inches high. With a small lick of the first piece, Alice finally grows back to her normal size and decides to put both mushroom pieces into her pockets.
Wandering through the woods, she meets the Cheshire Cat, an eerily grinning feline that can disappear and reappear at will. Alice tries her best to ask him where the White Rabbit has gone to, but her attempts are futile as he speaks vaguely and in riddles. He finally points her in the direction of the March Hare's house. It is here that Alice sees a long tea table set up outside with the March Hare himself accompanied by a Mad Hatter and a Dormouse. She finds out that they're celebrating their unbirthdays, which is a day of the year when it isn't one's birthday. Alice is briefly included in the celebrations before they manically dash about the tea table, offering Alice tea but never actually giving her any. When the White Rabbit shows up, the Hatter and Hare attempt to fix his pocket watch, but end up destroying it in the process. After they've literally thrown him out of the tea table, Alice tries to run after him but finds that he has disappeared again. Soon Alice gives up trying to track the White Rabbit down, and decides to spend her time trying to get back home. She finds herself more and more lost in a forest called Tulgey Wood, which is filled with bizarre creatures that either snap at Alice, Huckle and his friends or pay no attention to them at all. They break down crying, and find the Cheshire Cat again. He opens a door in a tree that leads to a seemingly neverending hedge maze, telling Alice that the Queen of Hearts could possibly help her.
She meets some giant playing cards who are painting white roses red since the Queen only prefers red and will behead them if she discovers their mistake. Alice tries to help them, but the White Rabbit appears and heralds the arrival of the Queen, her significantly shorter husband, and her massive pack of cards army. The Queen has a ferocious temper and is prone to having anyone beheaded at a moment's notice, to which she applies to the card painters who unsuccessfully painted the white roses. Randomly switching between bipolar moods, she invites Alice to play a game of croquet with her, using flamingos as mallets, hedgehogs as balls, and card soldiers as goals. The Queen actively cheats during the game, and beheads anyone who dares stand in the way of her victory. The Cheshire Cat appears and attaches the beak of the Queen's flamingo mallet to the bottom of her dress, resulting in her toppling over and revealing her underwear. The Cat disappears in time to make it look like Alice was the prankster, but before the Queen can order her execution, the King suggests they have a trial.
The Dormouse, the March Hare, and the Mad Hatter all come forth as witnesses that add nothing whatsoever to the trial at hand. When the subject of unbirthdays arise, everyone in the courtroom celebrates the Queen's. Thanks to some more mischief by the Cheshire Cat, pandemonium ensues. Alice suddenly remembers that the mushrooms were still in her pocket and shoves both pieces into her mouth, growing to gigantic proportions. At this size, Alice scolds the Queen for her rash behavior, but then starts shrinking back to her normal size all too soon.
The Queen orders for her guards to execute Alice, which results in a frantic chase through Wonderland. Various characters Alice met on her journey appear and inexplicably join the Queen and her guards in their pursuit. Coming back to the Doorknob, Alice is told by him that he's still locked, and that she's already on the other side. Looking through the keyhole, Alice sees herself asleep in the park. She urgently bangs on the door as the mob draws closer, until she gradually awakens to the sound of her sister's voice. The two of them return home for teatime while Alice muses on the idea that all of her adventures in Wonderland had been but a dream.